Basis accounting in contrast to cash basis accounting

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Reference no: EM131872591

Group Discussion #2 This forum is available for posting from 10/16 -10/22. See Lessons– Week 5- for additional guidelines about posting and the rubric that will be used to grade the Group Discussions. Late postings will not be graded.

The revenue recognition principle and the matching principle are the basis of recording net income under accrual basis accounting in contrast to cash basis accounting.

Case I

Executive Lawn provides $100 of landscape maintenance to Peterson Law on April 10.

Consider three scenarios

Peterson pays for the lawn service in advance on March 28.

Peterson pays for the lawn service on April 10, the day of service

Peterson pays for the lawn service the following month on May 2.

Case II

Peterson Law asks Executive Lawn to provide $100 of landscape maintenance. Executive Lawn provides the service on April 10.

Consider three scenarios

Peterson pays for the lawn service in advance on March 28.

Peterson pays for the lawn service on April 10, the day of service

Peterson pays for the lawn service the following month on May 2.

Each student in the group will select one scenario from Case I or one scenario from Case II to discuss. Each student must select a different scenario

Select one scenario from Case I (and indicate the scenario you are selecting)

If Executive Lawn uses accrual-basis accounting, for the scenario you select, on which date would Executive Lawn record the $100 revenue? Explain the reason for your answer.

If Executive Lawn uses cash-basis accounting, for the scenario you select, on which date would Executive Lawn record the $100 revenue? Explain the reason for your answer

OR Select one scenario from Case II (and indicate the scenario you are selecting)

If Peterson Law uses accrual-basis accounting, for the scenario you select, on which date would Peterson Law record the $100 expense ? Explain the reason for your answer.

If Peterson Law uses cash-basis accounting, for the scenario you select, on which date would Peterson Law record the $100 expense? Explain the reason for your answer

Students must also respond to the postings of other students and discuss follow-up responses to their own postings.

Reference no: EM131872591

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